Walgreens, Rite Aid end $9.4B merger for different deal

By Andrew V. Pestano Follow @AVPLive9 Contact the Author   |  June 29, 2017 at 12:31 PM
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June 29 (UPI) -- Walgreens Boots Alliance Inc. and Rite Aid Corp. abandoned their $9.4 billion merger agreement and instead Walgreens will buy about half of Rite Aid's stores.

The companies on Thursday said they would no longer seek to combine. Instead, Walgreens will purchase 2,186 Rite Aid stores, as well as three distribution centers and inventory, for $5.2 billion. Rite Aid will have 2,350 stores after the deal's conclusion.

The Federal Trade Commission was expected to rule against the full merger of Walgreens and Rite Aid on Thursday, CNN Money reported. The deal was under intense scrutiny because it could have led to an oligopoly as Walgreens and CVS would be the only two major pharmacy chains.

"This merger would have led to higher prices," former FTC policy director David Balto said. "It's important to preserve three national competitors. That's in essence what the FTC was saying."

After buying about half of Rite Aid stores, mainly in the U.S. Northeast, Mid-Atlantic and southeastern states, Walgreens will edge CVS to have the most stores in the United States with more than 10,200 stores to the more than 8,600 stores owned by CVS, USA Today reported.

Walgreens CEO Stefano Pessina said the new deal is "more attractive than the transaction it replaces."

The new deal must also be approved by U.S. anti-trust regulators. Walgreens must pay Rite Aid $325 million as part of a provision agreed in case the previous merger deal fell apart.

Rite Aid CEO John Standley said the new deal will allow the company to reduce debt, which will improve financial flexibility.

"While we believe that pursuing the merger with WBA was the right thing to do for our investors and customers, this new agreement provides a clear path forward and positions Rite Aid as a strong, independent, multi-regional drugstore chain and pharmacy benefits manager with a compelling footprint in key markets," Standley said in a statement.

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